Sustainable Investing | How we engage
- As researchers, we have ongoing dialogue with management teams, covering a wide range of topics.
- Our research conversations focus on the sustainability issues that are most relevant to each individual company.
- We have summarized our views in letters to CEOs about sustainability priorities and potential for future progress.
In the rapidly evolving field of sustainable investing, a key focus is on corporate engagement. This term is sometimes defined very narrowly, and sometimes people assume that “engagement” means “opposition.” A more accurate and complete understanding is to recognize that corporate engagement includes a range of activities that relate to our role as stewards of capital. These activities can include research, ongoing dialogue with corporate management teams, contributions to the development of best practices, and proxy voting. The details of these activities can (and should) vary depending on the type of investor involved and the specifics of their investment process.
At Putnam, our role as fundamental investors and active managers enables us to have ongoing dialogue with the management teams of companies in which we invest, across a wide range of topics and with a long-term investment horizon. This helps us better understand key sustainability-related opportunities and challenges and their relationship to overall corporate strategy. We aim for our focus to be as business-relevant and forward-looking as possible.
We believe that active managers with analytical and investment expertise have a distinct role to play in working with company management teams, and Putnam has a wide reach in this area. Our research team held over 2,000 meetings with company managements in 2018.
CEO letters: An extension of our dialogue
As part of our corporate engagement, in 2019, we sent individual letters to the CEOs of every company owned by Putnam Sustainable Leaders and Putnam Sustainable Future strategies. In the letters, we highlighted sustainability considerations that were important drivers of our investment decisions. For each company, we acknowledged their efforts to date and outlined areas where we are monitoring ongoing progress. Our letters have been met with strong responses from CEOs and senior management teams, and we expect that the resulting discussions will continue to enhance our investment research.
“As active managers, we are able to have focused, constructive, and ongoing dialogue with the management teams of companies in which we invest.”
Advocacy for improved disclosure
Our discussions with company management teams and boards typically relate to corporate strategy, governance, and external reporting. A number of companies in our portfolios have recently increased their disclosures on relevant ESG metrics. They are often guided by frameworks like the SASB [Sustainability Accounting Standards Board] materiality map. Other companies have made significant progress in confirming their management strategies for material sustainability issues after working with multiple stakeholders, including our team.
Proxy voting is another essential element of corporate engagement, and it is important to note that the voting process for Putnam’s strategies is overseen by Putnam’s Proxy Committee. Our team collaborates closely with the governance experts on relevant proxy-related issues.
Putnam offers two strategies that are rooted in the recognition that strong sustainability performance may often coincide with strong financial performance over the long term.
Learn more about the strategies and our sustainable investing approach at putnam.com.
Sustainable investment strategies limit the types and number of investment opportunities available and, as a result, may underperform other strategies that do not have a sustainable focus. Sustainable investment strategies invest significantly in companies in one or more related industries or sectors, which would make the strategy more vulnerable to adverse developments affecting those industries or sectors.